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Cashing Government Checks for Noncustomers

Currently my bank will cash a government check...both federal or state, for non-customers. We have lost a considerable amount of money by providing this service. My questions: (1) Is there a requirement that we cash government checks for non-customers? (2) When a customer opens an account for the purpose of having an account in which to deposit a government check, can we require that the check be set up on direct deposit? Customers will open an account, deposit the check, cash the check and then close the account. If the deposit was made directly from the government we would waste far less time and money opening accounts for one day.

Answer by Andy Zavoina:

  1. No. There is no requirement to cash government checks for the same reasons you have noted. Losses will increase due to fraud.
  2. I know of no prohibition, but you may achieve your goal in other ways. Especially with CIP requirements, consider charging an early closure fee. At least you wouldn't get burned more than once.

Answer by John Burnett:

Be aware that your state may have a requirement that certain government checks be cashed. For example, Massachusetts (I sometimes think we should be to the left of California on the map requires banks, in section 46 of chapter 167 of MGL, to cash social security, SSI, and state retirement checks for non customers under a mandatory program.

First published on 1/5/04

First published on 01/05/2004

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